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Fortune 500 Daily & Breaking Business NewsTue, 31 Mar 2015 22:02:53 +0000enhourly1http://wordpress.com/http://1.gravatar.com/blavatar/dab01945b542bffb69b4f700d7a35f8f?s=96&d=http%3A%2F%2Fs2.wp.com%2Fi%2Fbuttonw-com.png » Great Recession - Fortunehttp://fortune.com
Fortunehttps://s0.wp.com/wp-content/themes/vip/fortune/assets/images/fortunelogo.pnghttp://fortune.com25040How to protect America’s Uber drivers and other part-timershttp://fortune.com/2015/03/18/how-to-protect-americas-uber-drivers-and-other-part-timers/
http://fortune.com/2015/03/18/how-to-protect-americas-uber-drivers-and-other-part-timers/#commentsWed, 18 Mar 2015 15:28:31 +0000http://fortune.com/?p=1036794]]>Technology has made commerce in services simpler than ever before. Smartphones, wireless broadband and a host of entrepreneurial offerings have placed a new suite of on-demand services - from transportation to housekeeping to grocery delivery - in the palm of our hands at low cost and great convenience. For workers, the rise of the so-called "gig" economy may be highly beneficial, offering new sources of flexible work that can often, if necessary, be cobbled together to generate the equivalent of full-time earnings – much needed in the wake of the Great Recession. It can also be daunting – even alarming – as traditional jobs and the associated benefits are progressively replaced by these new forms of work.

Rather than a job at a store or factory, work can now be chopped up into pieces that look more like tasks or projects. As a consequence, the nature of work could well be in the process of a fundamental change from an industrial era concept to a new 21st century, information era construct. This may represent the biggest change in the nature of work and incomes in the United States since women entered the workforce in droves in the 1970s. It could also represent a complex challenge to the public policies associated with employment,many of which were originally crafted in the 1930s to protect workers and their families in another time of profound economic change.

We've already seen rapid growth in the number of workers unmoored from a single place of full-time work. U.S. government data confirm that 27.5 million people – nearly 20% of workers – currently work part-time, including almost 7 million of them wanting but not finding full-time jobs, and over 5 million people holding multiple jobs. In a 2014 survey, the Freelancers Union estimated that there are as many as 50 million freelance workers, representing nearly one-third of the nation’s workforce – including more than 26 million that are contractors or temporary workers plus nearly 24 million that moonlight or supplement their incomes with independent work.

These fundamental shifts in the nature of work – driven not just by technology but also by globalization and the attendant transition to a services-intensive economy – call for a new dialogue. We need to listen both to entrepreneurs who are quick to emphasize the benefits and to workers who understandably fear the consequences. These trends are too powerful to be reversed but their downside – particularly for low- skill workers – must be addressed.

A new report from the Inclusive Prosperity Commission (IPC), on which I served and which was convened by the Center for American Progress, calls for policymakers to grapple with the changing nature of these new work patterns and relationships. We of course want to nurture the sharing economy – pioneered by companies like Uber, Airbnb, TaskRabbit and many others – because it has the potential to increase consumer welfare, foster company formation, generate good work, raise living standards and propel economic growth. However, we also ought to ensure that worker protections are adapted in ways that reflect these tectonic shifts.

This new model can have clear benefits for workers, including higher wages and increased flexibility. For example, Uber – which employed 160,000 people by the end of 2014 – allows its drivers to make $4 to $10 more per hour than taxi drivers and chauffeurs in the same markets, according to a study commissioned by the company. For unemployed workers, the gig economy can be an entry point into the job market. For workers who already have a job, a side gig can supplement their full-time income. For under-employed people, many new services enable them to extract income from the “excess capacity” in their homes, cars and other personal belongings.

But as we explain in the IPC report, there are potential pitfalls for workers as well. Some gig economy companies shift overhead and risk to their independent workers (as well as to their customers), the burden of which can materially erode workers' take-home pay. Current law allows these new companies to free-ride on the social safety net, which is supported by contributions from traditional employers, by avoiding payments to Social Security, workmen’s compensation and unemployment insurance – not to mention skirting OSHA, overtime, and other labor regulations.

In response to criticism of these practices, some companies have begun to offer a modicum of benefits and protections. TaskRabbit - an online portal to cleaning, handyman, moving, and personal assistant services that employs up to 30,000 contractors in 19 cities -has adopted a $15 an hour minimum wage, secured a $1 million insurance policy to cover clients as well as contractors, and offered discounted health insurance and accounting services. Similarly, a personal delivery company called Favor has reportedly started giving workers longer shifts and guaranteeing a $9 minimum wage. And, Lyft, a car sharing service, is partnering with the Freelancers Union – a 250,000-member labor organization that represents independent workers – to help employees access benefits like health and life insurance.

Interestingly, the Affordable Care Act (ACA) has facilitated the rise of the gig economy. Before the ACA, many workers were often stuck in jobs which were not necessarily the highest and best use of their skills because they were tethered to their employer-sponsored health plans. The ACA has significantly reduced the friction and increased the mobility in our labor markets by making it possible – and affordable – for independent workers to secure good health care for their families.

Many of my fellow commissioners on the IPC argue that, to protect workers and consumers in this new economy, we can't simply rely on companies to police themselves. They believe that, in addition to skills training necessary to prepare workers to prosper in the new economy, we need updated labor policies that react to these rapid changes in technology and work patterns. As new work arrangements evolve, they advocate adjusting labor law to recognize flexible forms of employment while guaranteeing workers current basic protections. This argument is based on the observation that labor laws enacted in the 20th century - like the minimum wage, overtime regulations, OSHA standards, and unemployment insurance - helped build and protect the middle class and now can be adapted to meet the needs of the 21st century workforce.

We need to ensure that the sharing economy benefits us all – consumers, entrepreneurs and workers alike. Businesses have to be the first line of defense by adopting commercial practices which enable their companies to thrive but which are just to their workers and which finance their fair share of social costs. Businesses should collaborate with policymakers to take steps to guarantee that the gig economy becomes a tool for economic mobility rather than just a mechanism to pay less for more.

Glenn Hutchins served as a member of the Inclusive Prosperity Commission convened by the Center for American Progress.

]]>http://fortune.com/2015/03/18/how-to-protect-americas-uber-drivers-and-other-part-timers/feed/0Uber Driver Washington 2014nt2192Close to retirement? Why America’s recovery is working against youhttp://fortune.com/2014/11/10/why-55-to-65-year-olds-are-missing-out-on-americas-economic-recovery/
http://fortune.com/2014/11/10/why-55-to-65-year-olds-are-missing-out-on-americas-economic-recovery/#commentsMon, 10 Nov 2014 12:00:31 +0000http://fortune.com/?p=856168]]>When the Federal Reserve Board released data from its 2013 Survey Consumer Finance (SCF), most of the attention focused on the growing gap between rich and poor. This survey of wealth showed that most of the country had seen little or no gain since the last survey in 2010, but the top 1% is doing quite well. The story is that the bounce back of the stock market from its recession trough meant big gains for the wealthy, since they own most shares of outstanding stock.

Meanwhile, home prices are still far below bubble peaks. Since houses are an asset that most families own, this means that the middle class have seen no comparable run-up in their wealth. Furthermore, continuing high rates of unemployment and weak wage growth have prevented most workers from adding to their savings.

This is a bad picture for the country as a whole, but it is especially bad news for those at the edge of retirement. These families do not have time for an economic turnaround to improve their situation. They must rely on the wealth they have accumulated to date to support them in retirement, and that is it. This is not a pretty picture.

The middle quintile of the cohort of workers between the ages of 55 to 65 had an average of just $169,000 in wealth in 2013. This is actually $19,000 below the average wealth for this group as reported in the 2010 SCF. (All numbers are in 2013 dollars). What's more, it is $150,000 below the peak wealth for this group reported in the 2004 SCF. To give a basis for assessing the $169,000 difference, the median house price for the country as whole was $209,700 as of September.

This means that if a typical family in this 55 to 64 age group took all their wealth (which includes home equity) and used it to pay down their mortgage, they would still owe more than $50,000 on the median house. They would go into retirement with only their Social Security to support them, and a mortgage that is far from paid off.

The SCF supports this picture in its debt data. This middle quintile in the wealth distribution has only 54.6% of their home paid off on average. By comparison, in 1989, this group on average had equity equal to 81% of their house price, meaning that many could look forward to a retirement in which their mortgage was already paid off.

Going down to the second quintile, the situation looks far worse. The average wealth for this group is just $43,400. It had been almost $113,000 at its peak in 2007 and was $74,600 back in 1989, meaning that wealth for this group has declined by more than 40% over the last quarter century. Just over two-thirds of this group owns a house, with an average equity stake that is a bit more than 30% of the house price. This compares with a homeownership rate of more than 85% in 1989 and an average equity stake of more than 70%.

The average wealth for the bottom quintile is -$16,000, meaning that these people will be approaching retirement while still carrying debt. The homeowners from the group on average have negative equity, meaning they owe more than their house is worth.

Even the fourth quintile from this age group is not looking especially prosperous. Their average wealth is $470,000. That is down by almost 40% from the peak hit in 2004. The average equity stake for homeowners is 69.2%, down from 85.2% in 1989.

To put this $470,000 in perspective, if a couple used this money to pay off the mortgage on a median priced house, they would be able to buy an annuity that would pay them roughly $1,200 a month. This money, plus their Social Security, will keep them well above the poverty level, but it would hardly make for a comfortable retirement for households that are well above the median of the income distribution.

The basic story is that the vast majority of near retirees have managed to accumulate very little wealth. The collapse of the housing market bubble and the resulting economic downturn have been major blows from which they will not be able to recover before they retire. As a result they will be overwhelmingly dependent on Social Security and Medicare in their retirement years. Those who envision a population of affluent elderly who can easily get by with cuts in these programs are not looking at the data.

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

]]>http://fortune.com/2014/11/10/why-55-to-65-year-olds-are-missing-out-on-americas-economic-recovery/feed/0455192450nt2192Could a 40-year-old bank collapse have saved the U.S. economy?http://fortune.com/2014/10/08/could-a-40-year-old-bank-collapse-have-saved-the-u-s-economy/
http://fortune.com/2014/10/08/could-a-40-year-old-bank-collapse-have-saved-the-u-s-economy/#commentsWed, 08 Oct 2014 12:06:37 +0000http://fortune.com/?p=813058]]>This post is in partnership with Time. The article below was originally published at Time.com.

By Sam Frizell, TIME

When Franklin National Bank collapsed 40 years ago on Oct. 8, 1974, it was more of a beginning than an end. A lurid tale of the bank's downfall emerged over the next decade, involving mafia connections, ambitious Wall Street wannabes ? la Jordan Belfort and a principal investor with a suspicious bullet wound in his leg.

More importantly, the bank's demise was the first notable instance in which federal regulators helped a major bank wind down its operations in order to prevent global economic damage.

Franklin began as a humble Long Island bank with big-league aspirations. In the 1960s, the bank made questionable financial decisions to expand its operations and bum-rush the Manhattan banking scene. Franklin's overzealous bankers bought a luxurious, too-large office on Park Avenue and sold a controlling stake in the firm to a shady Milan-based international financier, Michele Sindona.

The Sindona story reads like an American Hustle-style, stranger-than-fiction tale. In 1974, high-risk loans, ill-advised foreign currency transactions, and swings in foreign exchange rates caused Franklin to hemorrhage cash. The company lost $63 million in the first five months of 1974, more than any other bank in American history until that point. Not long after, the U.S. charged Sindona with illegally transferring $40 million from banks he controlled in Italy to buy Franklin National, and then siphoning $15 million from it. In August of 1979, just before his trial was about to begin, Sindona -- who had ties to the Vatican and likely the Mafia -- disappeared under mysterious circumstances; his family and lawyers got letters that "supposedly proved that he had been abducted by Italian leftist radicals," according to TIME's coverage of the episode. When he finally emerged after nearly three months -- in a payphone booth near Times Square -- he had what he said was a bullet wound in his leg. (Sindona claimed he was kidnapped by Italian terrorists but his defense later admitted it was a hoax, and Italian magistrates said that a secret Masonic lodge helped Sindona fake his own kidnapping.) He was sentenced to serve a 25-year prison sentence and died in prison by cyanide poisoning in 1986.

But the bigger story about Franklin National was the boring one. The bank, which was the 20th-largest in the U.S., was the first major financial institution whose wind-down was orchestrated by federal regulators. In 1974, the biggest questions federal authorities faced were how much it would damage the global economy if Franklin collapsed, and whether regulators should get involved.

Sound familiar?

It should: A similar crisis occurred in 2008 when the collapse of the largest American financial institutions seriously damaged the global economy. Much like Lehman Brothers, JPMorgan Chase JPM and Goldman Sachs GS, Franklin National was deeply enmeshed in the global economy. In both 1974 and 2008, federal regulators were in a position to take decisive action, but they responded in very different ways.

In 1974, as Franklin began to collapse, the Federal Reserve's strategy was to lend it money in order to buy time for a bigger strategy, according to Joan Spero, author of The Failure of the Franklin National Bank: Challenge to the International. The Fed loaned Franklin a total of $1.75 billion, the largest bailout ever offered to a member bank at the time. Later, the Federal Deposit Insurance Corporation stepped in to help arrange a bank takeover. The FDIC set up negotiations with 16 banks, and a firm called European-American ultimately purchased Franklin for $125 million. The bottom line is that regulators helped to avoid an economic hit by lending Franklin money, and then smoothly transitioning the bank into a subsidiary of a functional institution.

"The entire financial world," Arthur Burns, the chairman of the Federal Reserve Board, told TIME shortly after, "can breathe more easily, not only in this country but abroad."

A very different scenario emerged in September 2008. The United States was on the cusp of the worst recession since the 1930s, and Lehman Brothers, the nation's fourth-biggest bank, was in trouble. Granted, the problem was much more serious in 2008 than in 1974, and the stakes were higher -- as would have been the size of the required bailout. The Fed ultimately allowed Lehman brothers to go bankrupt, and the economy seized up. (A sale to Barclays did look possible at the last minute, but it didn't work out.) A litany of criticshave suggested that the Fed should have orchestrated a Franklin National Bank-like wind-down for Lehman, and thereby could have prevented an international catastrophe.

"For the equilibrium of the world financial system, this was a genuine error," Christine Lagarde, France's finance minister at the time, said in the days after Lehman's bankruptcy, reports the New York Times. Indeed, what followed in the U.S. was the worst recession since the Great Depression.

Still, federal regulators tend to come under a lot of fire when things go wrong -- no matter what they do, which is kind of the point. Even in 1974, TIME criticized federal authorities for not being proactive enough with Franklin National Bank, despite its orderly purchase by European-American. In its story published in October of that year, TIME said federal authorities should have scrutinized Franklin and others more closely:

Faced with the failure of more than 50 federally insured banks in the past decade, the FDIC and other regulatory agencies need to keep a much closer watch not only on the roughly 150 banks on the FDIC'S "problem" list but also on virtually every bank in the nation. That way ailing banks will stand a better chance of being helped long before they reach a Franklin finale.

]]>http://fortune.com/2014/10/08/could-a-40-year-old-bank-collapse-have-saved-the-u-s-economy/feed/0Michele Sindona In His OfficelorenzettifortuneThe ups and downs of America’s economic recoveryhttp://fortune.com/2014/09/09/the-ups-and-downs-of-americas-economic-recovery/
http://fortune.com/2014/09/09/the-ups-and-downs-of-americas-economic-recovery/#commentsTue, 09 Sep 2014 17:12:03 +0000http://fortune.com/?p=783623]]>Behavioral finance teaches us that where money is concerned, Americans do two things over and over again. We adapt and we compare. We adapt to how much we have. Ever get a raise only to wonder a few weeks later how you ever lived on less? You adapted. And we compare ourselves to others. How much we have tends not to be as important as whether we have more or less than the colleague in the next office or the family next door.

The newly released 2013 Survey of Consumer Finances offers ample opportunity for the latter. I had the opportunity on Monday to debrief with a group of Federal Reserve economists who worked on the research. Diving in, it's easy to see why - despite the fact that the recession ended in 2009 — much of the country still feels as if the recovery passed it by. Here are high (and low) points:

It's not the top 1%, it's the top 3%.

Although the top 1% of wealthy Americans (and the corresponding 99%) dominate the headlines, the research shows that the top 3% is where the action is - at least as far as income is concerned. The top 3% took a huge hit, proportionately, in income during and following the recession. In 2007, this segment of the population represented 31.4% of the income in the U.S. By 2010, their share had fallen to 27.7%. It has since almost fully recovered, rebounding to 30.5%. Interestingly, the share of income of the rest of the top 10% (the top 4%-10%) has held steady at 17% since 1989. The share of wealth held by the top 3% didn't swing during the recession. Rather, it has been on a steady climb from 44.8% in 1989 to 54.4% in 2013.

More than ever, a college degree is a must.

On average, median pre-tax income (adjusted for inflation) fell for all families by 4.7% between 2010 to 2013. It dropped even further - 5.6% — for those with a high school education only. The only two groups to show real income growth were the top 20% of earners, where income grew by 4.3% and those with a college degree, where income grew by 1.1%. This, the economists noted, was a reflection of the fact that even though total employment is back above it's pre-recession level, the jobs created haven't been quality ones. Rather, they're of the low-wage variety.

Fear of the stock market prevails.

The percentage of American families that own stocks - which peaked in 2001 before beginning to decline - continued to trend down between 2007 and 2013. In 2013, 48.8% of families owned stocks (most through retirement plans rather than directly). That compares with 53.3% in the 2007 survey (the Survey of Consumer Finances is conducted every three years.) That this happened despite the strong rebound in the stock market is a sign, the economists noted, that the volatility in the markets may simply have proven too much to take, particularly for middle income people. Stock ownership is highly concentrated at the top of the income distribution - and contributed to the rebound in wealth among the top 10% (the mean value of their stock holdings rose from $885,000 in 2010 to $969,000 in 2013.)

A worrisome ancillary finding shows that the percentage of American families with retirement accounts of all types (IRAs, 401(k)s, Keoghs, etc.) slipped below 50% in 2013. This is likely not just market fear, the economists noted, but part of the general jobs trend. Good high paying jobs tend to come with 401(k) options. Those are not the type being created in this country. For those with retirement accounts, the picture was rosier. The median value rose from $47,200 in 2010 to $59,000 in 2013; the mean from $183,400 to $201,300.

Better news on consumer debt.

Finally, although we may not be earning as much, at least we're managing it a little bit better. How? By borrowing less. We're paying down our credit card balances. Through 2013, we were slower to take out new car loans (however, that activity has picked up in the past year). And although student debt has indeed continued to grow, the economists point out that the people taking out the largest sums - the percentage of families with outstanding balances in the $50,000 to $100,000 range jumped from 6% in 2001 to 13% in 2013, those with balances of $100,000+ from 1% to 6% over the same time period - are doctors, lawyers and other professionals who are likely to have the wherewithal to pay that money back, raising less concern over the long-run burden on families.

]]>http://fortune.com/2014/09/09/the-ups-and-downs-of-americas-economic-recovery/feed/0income inequalitynt2192Bill collectors calling your boss? Here’s what to dohttp://fortune.com/2014/08/28/bill-collectors-boss-workplace/
http://fortune.com/2014/08/28/bill-collectors-boss-workplace/#commentsThu, 28 Aug 2014 15:59:26 +0000http://fortune.com/?p=778013]]>Dear Annie: I have a problem I'm not proud of, but I'm sure I'm not the only one, so here goes. I always paid my bills on time and had an almost-perfect credit score before I got laid off in 2009. But for a couple of years after that, my family and I were living on credit while I looked for another job. I finally found the perfect position late last year, and luckily my salary now is substantial enough that I can set aside a decent amount each month to pay down our credit cards, thanks partly to payment agreements (including lower interest rates) I made with the banks. I've avoided using a credit counseling service because I've heard that so many of them are scams.

The problem is, we still have outstanding medical bills and other debts that have been handed over to a collection agency, and lately I've been getting calls from them at work. Now, they've even started calling my boss, apparently to embarrass me into paying. Do I have any rights here? Can I put a stop to this? --Red-Faced in Richmond

Dear RFR: You do have rights, including the right to keep your personal finances private. "About 77 million people in the U.S. now have debts in collection, and only a fraction of them know they can limit debt collectors' phone calls with just a few simple words," says Howard Dvorkin, founder of personal finance advice site Debt.com and author of Power Up: Taking Charge of Your Financial Destiny.

Under the federal Fair Debt Collection Practices Act (FDCP), along with similar state laws depending on where you live, "if an employee requests that the collection agency stop calling him or her at work, they have to comply," says Dvorkin.

While you're at it, you can also stop bill collectors from calling you at home. The law already says they have to leave you in peace before 7 a.m. and after 9 p.m., but if you'd rather not hear from them at all, ask that they contact you only by mail. Then put it in writing, and keep a copy of the letter so you can prove you wrote it.

What if the calls keep coming? It’s unlikely, says Dvorkin. "There is now a regular cottage industry of lawyers looking for FDCP violators," he observes. Martindale-Hubbell's national directory of attorneys, for instance, lists 9,160 of them.

The FDCP has teeth. Debt collectors who continue to phone you after they've been asked to knock it off are liable to statutory damages of $1,000 per instance, "plus state penalties, which can be even higher," Dvorkin says. "It gets expensive pretty quickly."

Dvorkin remembers the bad old days before the FDCP when "debt collection was the Wild West. They'd even call your parents and your neighbors, to try to embarrass you into paying." Now, he says, agencies are trying to revive some of those old tactics for a couple of reasons.

First, a market in consumer debt has sprung up. Rocked by high default rates during the downturn, many creditors have written off more than 90 million consumer credit accounts--from medical bills to unpaid gym memberships--as uncollectable, and then sold them to investors for as little as 4 cents on the dollar. It doesn't take a math whiz to see that extracting even half of what those debtors owe, which has been estimated at over $140 billion, has huge profit potential.

And second, banks are once again loosening the purse strings and issuing more credit cards with higher credit limits. "People who were cautious with credit during the recession are starting to run up those balances again," Dvorkin says.

Since a certain percentage of borrowers are bound to default, even in boom times (which these aren't), more players--including some unscrupulous ones--will be jumping into the lucrative debt collection game. "The bigger the debt-buying market gets, the more aggressive people will get about collecting what's owed," says Dvorkin.

You don't say how your boss has responded to the bill collectors, but "managers should not give out any information about an employee, because it may run afoul of employee-privacy laws," Dvorkin says. "Just say, 'This isn't my concern. Don't call again.' Then hang up. If a debt collector asks for any information about an employee, tell them to send the request in writing."

That usually won't happen because "these people are calling from boiler rooms where they're making 15 calls an hour. They're not going to slow down to write a letter," says Dvorkin. Even if one shows up, he adds, "a boss is under no legal obligation to answer it. Just put it in the employee's file, or the circular file, and forget about it."

Incidentally, legitimate credit counseling organizations do exist and they can be a big help in keeping overzealous creditors at bay. Debt.com features a list of state-licensed credit counselors, as does the Association of Credit Counseling Professionals.

"Pick one that has a good rating with the Better Business Bureau, and check with the attorney general's office in your state," Dvorkin suggests. "And make sure the organization will customize a debt-reduction plan for your specific needs." Good luck.

Talkback: Has a bill collector ever called you at work, about you or someone else? How did you respond? Leave a comment below.

Have a career question for Anne Fisher? Email askannie@fortune.com.

]]>http://fortune.com/2014/08/28/bill-collectors-boss-workplace/feed/0bills past due debtAnnieIs getting laid off really so 2007?http://fortune.com/2014/08/21/is-getting-laid-off-so-2007/
http://fortune.com/2014/08/21/is-getting-laid-off-so-2007/#commentsThu, 21 Aug 2014 19:00:28 +0000http://fortune.com/?p=774029]]>Americans have never felt better about their job security, at least according to a new Gallup poll released Thursday. Respondents who have a full or part-time job were asked how satisfied they are with the security of their jobs, and 58% said, “completely.”

As you can see, the poll only dates back to 1993, but the fact that Americans are happier with job security today than at any point in the past 20 years is pretty surprising. After all, that period contains the mid-1990s, one of the eras kindest to American laborers, when unemployment was historically low and wages consistently rising. Then again, people aren’t necessarily the best judges of their own economic situations, and it’s possible that this is a misperception of the job market rather than a real phenomenon.

So are Americans really fooling themselves? Not entirely. It’s quite possible that those Americans with jobs just feel more secure after a long recession and tepid recovery in which U.S. companies cut labor costs to the bone, and have been very slow to start rehiring again. But enthusiasm with which firms let workers go also means that a lot of companies are doing more than ever with fewer workers, and have very little wiggle room to let more workers go:

The above graph shows the four-week moving average of initial jobless claims, or the number of newly unemployed workers filing for unemployment benefits, as well as the size of the labor force. As you can see, the number of newly-fired workers is quite low, even as the labor force has continued to grow. In other words, there is actually a historically small percentage of the labor market getting fired these days, which backs up the the perception that job security is pretty good right now.

That being said, there’s pretty much no reason to believe that job security is better today than in the late 90s. Not only did average jobless claims bottom out in the year 2000, but the labor market was so tight that wages rose on average 1.7% per year after inflation, compared with falling real wages today.

So what can explain the fact that more Americans feel so secure in their jobs? The aforementioned fact that we’re coming out of a time of such radical job insecurity is surely one reason. But another reason why we feel more secure in our jobs today than in the go-go 90s is that workers from the 1990s likely had much better memories of an era when jobs were even more secure, an era that spanned from the end of World War Two and begin to peter out in in the 1980s.

University of North Carolina Professor Arne Kalleberg published a book Good Jobs, Bad Jobs which in part studied the decline in job security from the 1970s until today. He writes:

“Job insecurity and stability–and the resulting uncertainty–has increased in the United States since the 1970s. The conclusion is supported by evidence from diverse indicators: the growth of nonstandard, market-mediated work arrangements; the decline in employer tenure; the increase in rates of involuntary job loss for certain groups; the growth in the share of unemployment that is long-term; and the increase in workers’ perceptions that they will be laid off or otherwise lose their jobs.”

One fact that illustrates this trend in particular is the fact that until the 1980s, the Bureau of Labor Statistics didn’t even count the number of displaced workers who were involuntarily fired from their jobs until the mid 1980s, an anecdote that Kallberg argues, “is very telling, as it indicates that it was widely believed that this was not really a systemic, large-scale problem before then.” Kallberg points to data that shows that proportion of prime working age men who were permanently laid off from their jobs increased by nearly 100% between the 1970s and 1990s.

The reason for this, Kallberg argues, is mostly cultural. There was a fundamental shift during the 1970s and 1980s that was motivated in part by an increase in foreign competition in which firms started looking at labor strictly as a cost to be manipulated and outright cut in order to boost company performance and short term profits. Before then it was much more common for employers to avoid layoffs at all cost out of deference to the suffering they might cause. But today, Kallberg writes, “The growth of insecurity has redefined the meaning of the psychological contract between employers and their employees; it no longer points to an exchange of effort and loyalty for the promise of a secure job and future advancement.”

In other words, in the 1990s, Americans had much stronger memories of a post-war order in which the employer-employee relationship was built around loyalty rather than strictly the bottom line. Today’s workforce, however, was brought up in a much more transactional culture, and it’s likely enough to see a sharp decline in layoffs to make them feel relatively secure.

But it’s not just that folks’ personal situations aren’t improving. Compared to previous recoveries, economic performance today has been anemic, as shown by the chart below from the Center for American Progress.

This discrepancy was perhaps the single most debated issue during the 2012 presidential campaign, as critics of President Obama blasted him for presiding over the worst economic recovery in more than half a century. The President countered that the economy’s poor performance was attributable to the fact that we had just suffered through a financial crisis of epic proportions, and that economies tend to perform worse following financial crises.

Academic studies have shown that this is the case, and if President Obama’s reelection is any indication, the American public bought the story. But a small but growing number of economists are putting forward the idea that our economic history is wrong. It is commonly supposed that the past 15 years has been dominated by two recessions–2001 and 2008/2009–with average, or even pretty good, performance in between.

But what if that narrative is just an illusion? What if we’ve really been suffering from a 15-year malaise brought on by more powerful forces that even those that caused the financial crisis? That’s the basic premise of a new theory called “secular stagnation” that’s been argued by economists of no lesser stature than former Treasury Secretary Larry Summers. In a new ebook published Friday by the Centre for Economic Policy Research on the concept, Summers and fellow economic luminaries like Paul Krugman, Barry Eichengreen, and Richard Koo explore the idea that the economy moved into an era of slower growth long ago. This was brought on by an aging wealthy world, slowing technology growth, and growing income inequality.

How has the world evolved to be less hospitable to economic growth? One reason is the fact that the wealthy world is much older today than in any time in modern economic history. Advances in medicine have allowed people, especially in the developed world, to live longer. This has lead for a much greater need to save rather than spend, as older folks tend to live off their savings than income. The authors of the book point out, for example, that the required amount of money for saving in Germany “rose from almost two times GDP in 1970 to three and a quarter times GDP in 2010.” Similar trends are happening across the wealthy world, creating a lot of demand for safe assets like U.S. government debt and pushing down interest rates over time.

You can see from the chart above how interest rates and inflation have moved slowly but steadily downward for several years now. The effect of this is to rob central banks of the ability to stimulate the economy because naturally low interest rates prevent the ability to lower interest rates as low as necessary to jolt economies out of recessions, a dynamic that’s been clearly on display during this recovery. This excess of saving can also encourage the sort of financial bubbles we saw in 2001 and 2008 because investors are motivated to take excessive risks and reach for yield during periods of low interest rates.

But it’s not just the aging of the population that we have to contend with, but slowing population growth overall. The slowing of population growth means companies have less incentive to invest in the future because there is little reason to believe that there will be demand for their products, a dynamic that also feeds into lower overall interest rates. We’ve seen this dynamic on display for years now in Japan, which has battled a declining population, low interest rates and even deflation, slow growth and government deficits.

The standard prescription for this problem is to try to aim for higher but steady inflation of say 4%, rather than the 2% target of today. This would give policy makers the ability to sufficiently lower interest rates during times like today when negative real interest rates are necessary to stimulate growth. But the experience in Japan shows just how difficult it is when there are so many headwinds fighting against higher inflation, let alone a strong political opposition to any sort of inflation at all.

As for fiscal policy, it’s no sure thing that fiscal policy can jolt us out of this demographic crunch either. As Paul Krugman–no skeptic of the salutory power of federal spending–writes in his section:

What about fiscal policy? Here the standard argument is that deficit spending can serve as a bridge across a temporary problem, supporting demand while, for example, households pay down debt and restore the health of their balance sheets, at which point they begin spending normally again. Once that has happened, monetary policy can take over the job of sustaining demand while the government goes about restoring its own balance sheet. But what if a negative real natural rate isn’t a temporary phenomenon? Is there a fiscally sustainable way to keep supporting demand?

In other words, we could take advantage of low interest rates and use deficit spending to prop up demand, but what’s the end game in that scenario? The case of Japan has showed that government spending can support the economy and living standards for years without debt markets revolting, but nobody is sure how that country will begin to reduce its debt and shift the burden of economic growth back to the private sector.

Looking deeply into their crystal balls, some of the brightest minds in economics see the U.S. and much of the developed world turning Japanese. And that’s not a future most of us want to court.

]]>http://fortune.com/2014/08/21/is-america-destined-for-slow-growth/feed/0bad economy american flagchristopherrmatthewseconSnap-1Screen Shot 2014-08-20 at 1.48.12 PMHow U.S. states can get small businesses growing (again)http://fortune.com/2014/08/14/how-u-s-states-can-get-small-businesses-growing-again/
http://fortune.com/2014/08/14/how-u-s-states-can-get-small-businesses-growing-again/#commentsThu, 14 Aug 2014 12:52:43 +0000http://fortune.com/?p=770618]]>Growth without jobs. That's the prospect an editorial in The New York Times posed a couple of weeks ago. That headline, sparked by the government's report that the U.S. economy created 209,000 jobs in July, likely strikes a chord with policy makers and working families anxious about the sluggish pace of the economy's full recovery.

Interestingly, an NBC News/Wall Street Journal poll released just a few days later found that 64% of those polled said the Great Recession is still having an impact on them, and 49% believe the country is still in a recession.

In itself, the July number is not terrible. It actually continues the six-month trend of 200,000 or more jobs created. But, coming on the heels of the 277,000 new jobs we saw in June, it is the latest month of the all-too-familiar, up and down trend of the last few years. At this rate, it could take three to four more years before unemployment falls to 4.7%, a last seen in November 2007 prior to the recession.

What will it take to change this trajectory?

Usually at this point the observers bemoan the gridlock in Washington or speculate about the Federal Reserve. However, instead of waiting for a Washington solution, business and government leaders must act where they can, and that's at the regional level. Mayors, governors and the business community must use the road map they already have in hand, a playbook for creating jobs that focuses on driving innovation and competitiveness through small businesses and entrepreneurs across three key areas - capital, skills and ecosystems.

This playbook is already gaining traction in some parts of the country. On Wednesday, for example, Massachusetts Gov. Deval Patrick signed an $80 million package to spur innovation and job creation, which passed with broad support by the legislature. Notably, it includes key elements from each area of the jobs playbook.

First, it expands access to capital for small businesses and entrepreneurs. In a recently released Harvard Business School working paper, we show that credit for small businesses is still scarce and is having a dampening effect on the economy's recovery. The Massachusetts package allows the state pension fund to invest at least $150 million in institutions that make capital available to small business and very young companies that are still developing their products and services. It also provides $1.5 million through the public-private partnership MassVentures to support early-stage, tech startups as they move from concept to commercialization.

Second, in the area of skills, among other things, Massachusetts will create an Advanced Manufacturing, Technology and Hospitality Training Trust Fund and provide funds for MassCAN, a partnership that includes entities such as Google GOOG, Microsoft MSFT, the Mass Business Roundtable, the Mass Tech Collaborative, and the Massachusetts Competitive Partnership, all of whom have pledged dollar-for-dollar support for a computer science education initiative in public schools.

Finally, Massachusetts, like many other states, is investing in its entrepreneurial ecosystem.

New institutions like incubators, accelerators, and shared work spaces are part of their equation, as are programs like the Innovation Commercialization Seed Fund, a competitive grant program for researchers and students at public and private universities to test business ideas in the marketplace. All of these create more support and opportunities for entrepreneurs and early-stage firms by providing infrastructure, networks and other critical resources.

Yes, this is one state, but there are two important things to point out about this legislation: First?, it takes proven economic strategies and tailors them to the assets and opportunities of the region. Second, it leverages public-private partnerships and has support from both business and government.

Wait for Washington to act? We could. But in Massachusetts and other parts of the country government and business leaders are not waiting. They are taking parts of the playbook for jobs and driving solutions that make sense.

This is the way to stop the sluggish, up-down tack we've been on from month-to-month. Small businesses and entrepreneurs are the engine for job creation and since the recession they have not had the fuel needed to be firing on all cylinders. These strategies can change that, and in doing so, are making sure we can remove the phrase "growth without jobs" from our economic vocabulary.

Karen Mills is a senior fellow with the Harvard Business School and the Harvard Kennedy School focused on competitiveness, entrepreneurship and innovation. She was a member of President Obama's Cabinet, serving as Administrator of the U.S. Small Business Administration from 2009 to 2013.

]]>http://fortune.com/2014/08/14/how-u-s-states-can-get-small-businesses-growing-again/feed/0nt2192Two cheers for ‘too big to fail’http://fortune.com/2014/08/07/two-cheers-for-too-big-to-fail/
http://fortune.com/2014/08/07/two-cheers-for-too-big-to-fail/#commentsThu, 07 Aug 2014 15:18:01 +0000http://fortune.com/?p=766313]]>Just last month, retired U.S. Congressman Barney Frank was back on Capitol Hill to defend his signature Dodd-Frank legislation. Republicans charged that the four-year-old financial reform law has failed to eliminate the much-reviled policy of "Too Big to Fail." Journalists on the left and on the right jumped on the bandwagon as well.

Are the critics right? Do we still live in the era of "Too big to fail?" All I can say is: I sincerely hope so.

Ever since the bank bailouts of 2008 and early 2009, Americans have scarcely paused in their non-stop demonization of the policies that halted the country's frightening slide into a near-depression.

Tea-partiers on the right hate the bailouts because they hate any intrusion by the federal government. Populists on the left hate the bailouts because they assisted banks, now and forever reviled as the enemy.

Apparently unnoticed by these commentators is a tiny fact: the bailouts worked. The economy just completed the fifth straight year of positive growth. America has more people working than ever. Unemployment is down to 6.2%, a number only slightly above what may fairly be viewed as "normal." Long-term, or chronic, joblessness is also reduced. Banks are better capitalized and safer. Government deficits have plunged. The stock market is well above its pre-crash level.

Although government bailouts were hardly responsible for all of that, they clearly stopped the market carnage, permitting private sector growth to eventually resume. Of course, they can still be criticized on the basis that their cost was too great, or that they set a harmful precedent. Critics have overstated both of these claims.

The bailouts themselves were profitable to the taxpayers. Commentators have pointed out that government costs associated with the Great Recession included many items outside the calculus of the Troubled Asset Relief Program (TARP) and other federal rescue programs--such as foregone tax revenues and higher expenses for unemployment insurance. But these were costs caused by the recession--not by the bailouts that helped end it. Had there been no bailouts, the government's expenses would have been more prolonged, and far greater.

The moral hazard precedent of the bailouts has also been both misunderstood and overstated. First, there is no "policy" of "too big to fail." It is not written down and is not ordained by any law. Rather, "too big to fail" is an appropriate political response to an unanticipated calamity. When society is faced with a potential or actual disaster that swamps the power of individual relief efforts, it is proper and right for government to intervene. That is a big reason why we have government.

Since there was no formal bailout policy, the bailouts that occurred in 2008 and 2009 were haphazard and inconsistent. We should be thankful for this, because the off-on pattern of rescues created a muddled precedent for any would-be gambler of the future. Consider a capsulized version of the prominent failures: dozens of mortgage lenders (the epicenter of the bubble) failed and their creditors were not assisted. Bear Stearns' creditors were bailed out in full but its stock was mostly wiped out. Fannie Mae and Freddie Mac's debt was bailed out but its preferred stock, and its equity, value collapsed. Lehman's stock was wiped out and its creditors got no assistance. AIG's creditors were rescued but its stock was destroyed. This was also the pattern with many weaker banks.

No investor taking a flyer now can know whether his or her chosen vehicle will be the next AIG AIG or, contrariwise, the next Lehman. A speculator can certainly draw the inference that bank credit is safer than equity so, at the margin, investors will be more likely to lend to banks. But banks also need equity--more so than ever thanks to the new capital rules.

And equity investors in banks that got rescued paid, as is proper, a severe price. For instance, from year-end 2006 (before the bubble burst) to today, stock in Citigroup C, which got more help than any other bank, is down about 90%. That does not sound like a free ride to me. Even investors in most banks that did not fail, but did get TARP investment, have underperformed the market averages.

It is true, and very regrettable, that many bank executives (including at Citi) were rewarded for failure with rather outrageous parachutes. But those were awarded well before any bailouts, and taxpayers did not pay for them.

It is also true that bank stockholders would have fared worse had no bailouts occurred. But retribution is a poor basis for public policy. Only vengeance can justify the view that society should suffer so that banks will feel it even worse. In any case, we have good experience of what happens when the government permits waves of successive bank failures. It is called the Great Depression.

One can certainly argue that the bailouts could have been designed better, or been distributed more equitably. They were conceived under extreme duress, and were hardly perfect. And bailouts should never be more than a last resort.

But we should not forget that the source of the severe economic hardship that Americans experienced was reckless lending and borrowing, on Wall Street and on Main Street, often enabled by lax regulation. The bailouts didn't cause that pain--they attenuated it. Should another crisis develop, someday, we will want government to have every possible remedy at its disposal. Just as it had in 2008.

Roger Lowenstein is the author, most recently, of The End of Wall Street. He is writing a book on the origins of the U.S. Federal Reserve.

]]>http://fortune.com/2014/08/07/two-cheers-for-too-big-to-fail/feed/0Wall Street Bailout Returns 8.2% Profit Beating Treasury Bondsnt2192How to avoid another Wall Street tsunamihttp://fortune.com/2014/08/04/how-to-avoid-another-wall-street-tsunami/
http://fortune.com/2014/08/04/how-to-avoid-another-wall-street-tsunami/#commentsMon, 04 Aug 2014 09:00:23 +0000http://fortune.com/?p=762911]]>As the chair of the board of the Ben & Jerry's corporation (but writing as an individual), I can speak firsthand to the benefits of paying workers a living wage, a policy we have had in place for more than 20 years. Currently in Vermont that starting wage is in excess of $16.00 per hour, plus health insurance and other benefits. Our experience has proven that fair wages are good for business and good for communities.

And so I’m encouraged to see that 10 states and the District of Columbia have enacted minimum wage increases this year. But as we learned during the financial crisis in 2008, high-road business practices are not enough to protect workers and communities from the destructive capacity of a reckless financial sector. A decent paycheck can only stretch so far when friends, family and neighbors lose their homes and livelihoods.

More than five years after crash of the U.S. housing market, a big share of financial activity still threatens our economic security. The "too big to fail" banks are bigger today than they were before the crisis. Computer-driven high-frequency trading with no connection to the real economy is taking profits from traditional investors and undermining market stability.

And so while I support raising the minimum wage, I'm also hoping policymakers will do much more to tackle the Wall Street threats that could wash away these wage gains.

One tool that would help steer us in the right direction is a financial transaction tax. Through a fee of a fraction of a percent on each trade of stocks, bonds, and derivatives, we could encourage longer-term, productive investment.

More than 30 countries currently have such taxes on particular financial instruments. These include many fast-growing financial markets, such as the United Kingdom, South Africa, Hong Kong, Singapore, Switzerland, and India.

Europe is now moving ahead to adopt the first regional financial transaction tax. In a historic agreement, 10 European Union member governments, led by Germany and France, have announced plans to introduce the tax in stages, starting with taxes on trades of shares and some derivatives, with revenue beginning to roll in by January 1, 2016 at the latest.

While discouraging purely speculative short-term trading, such taxes would also generate significant revenue that could be used to make us economically more secure, for example through investments in infrastructure, climate, and health programs.

While the details of the European tax still need to be worked out, a European Commission proposal for a tax of 0.1% on stock and bond trades and 0.01% on derivatives could be expected to generate about 31 billion euros (or $42 billion) per year. In the United States, the Joint Committee on Taxation projects that a tax of 0.03% on stock, bond and derivative trades could raise $350 billion over 10 years. Other bills with higher rates could generate even more revenue.

Of course some in the business community will argue against this tax (as they always do), claiming that the extra cost would hurt economic growth and destroy jobs. But a careful study by the European Commission concluded that their proposed tax is likely to be a job creator, especially if revenues are reinvested wisely.

In the 1970s, I helped Ben & Jerry's get their first loan to start a small business that now operates in over 30 countries. Today, while the stock market is surging, small businesses face significant obstacles in getting access to credit. The lure of Wall Street gambling jackpots - no matter the potential cost to the investor or to the world - overpowers the attraction of patient Main Street investments.

A financial transaction tax would not solve all the problems with the financial industry. But as we work to build high-road business practices, we should see it as a bit of insurance against future Wall Street tsunamis.

Jeff Furman serves as Chair of the Ben & Jerry’s Board of Directors. Views here are his own and not a reflection of the company.

]]>http://fortune.com/2014/08/04/how-to-avoid-another-wall-street-tsunami/feed/0Five Years After Start Of Financial Crisis, Wall Street Continues To Humnt2192Infosys CEO: How to lead in a post-financial crisis erahttp://fortune.com/2014/06/20/infosys-ceo-how-to-lead-in-a-post-financial-crisis-era/
http://fortune.com/2014/06/20/infosys-ceo-how-to-lead-in-a-post-financial-crisis-era/#commentsFri, 20 Jun 2014 13:16:43 +0000http://fortune.com/?p=723302]]>Corporations across the world and the leaders at its helm are often seeking answers to a much-debated question: What are the ideal qualities of a leader? There is no dearth of answers that one can find on this topic. For a simple reason that there are no easy answers. There isn't a "one size fits all" response. In my own leadership journey spanning over three decades, my experience has been no different. Every corporation and every leader, I believe, discovers leadership qualities through their own unique journeys. What works for one may not necessarily work for another. What I have come to understand is that while certain fundamental qualities of a leader are time and context invariant, there are others that need to evolve with the changing times.

The primary role of a leader is to inspire hope. Leaders have a responsibility to raise the aspirations of their people and enable them to realize those aspirations. They have to lead by example and have to conduct themselves with fairness, honesty and integrity. Needless to say, they need to possess the required business acumen that comprises a deep understanding of current realities and also a firm view on the emerging future. This business acumen is much-needed to enable them to balance short-term organizational priorities with its long-term vision and to build an organization that will stand the test of time. I could talk at length about these widely acknowledged prerequisite qualities of a leader but I will focus on talking about the qualities that are most relevant today.

Trust

The events that led to the recent global economic crisis made it widely acknowledged as the crisis of trust. One of the most important qualities that business leaders today, in the post-crisis era, need to possess is the ability earn and build trust - within their organization and outside. Building trust is not an end-state but a continuous journey. At the organizational level, it necessitates the institutionalizing of robust governance mechanisms that promote transparency and ethical conduct. At the personal level, it requires business leaders to have the courage to tell the truth and the humility to say 'sorry' when needed. In essence, business leaders need to earn the right to operate by earning the trust of all their stakeholders.

Courage

In a little over the past decade alone, I have been witness to three major crises - the Asian financial crisis, the dotcom bubble burst and the most recent global economic meltdown. It is without doubt that such crises are an inevitable part of business and the frequency of their recurrence is only going to increase. The recurring crises notwithstanding, the socio-economic and political environment in which businesses operate in today is becoming increasingly dynamic and complex. Business leaders therefore need nothing short of nerves of steel to take these multiple challenges head-on and keep marching forward. They need to be in control at all times and instill a sense of hope and courage, particularly in the face of adversity. As they say, when the going gets tough, the tough get going. There hasn't been a better time to use this clich?.

Big picture view

There are various schools of thought when it comes to what business leaders should dedicate a substantial amount of their time to. There is one school of thought that believes business leaders need to focus largely on anticipating and preparing for the future. Another school of thought emphasizes on the common adage - "the devil is in the details." In other words, business leaders need to be hands-on when it comes to understanding and shaping the realities on the ground. My own experience has taught me that business leaders need to embrace both - a focus on the larger picture and an attention to details. An idea without an effective implementation plan is of little value. Business leaders therefore need to be able to understand and contribute to all aspects of business - be it strategy, operations, finance or marketing. In essence, business leaders today need to be comprehensive in their approach and in the competencies they acquire. As demanding as it may sound, they are increasingly expected to be a jack of all trades and master too.

To conclude, I will reiterate my belief that leadership is a journey of lifelong learning. There are no mantras to success that are cast in stone. There are a few leadership qualities that stand the test of time but others which need to evolve and be embraced with the changing times. Business leaders need to embark on this journey of discovery called leadership with openness, courage and humility. The destination is certainly going to be worthwhile.

Thanks to the Great Recession, capitalism has another PR problem. Marx is back, according to Foreign Policy. College students are demanding new courses in socialist ideology. A ponderous economics treatise advocating confiscatory taxes is a national bestseller.

Such suspicion of capitalism comes and goes with every recession. Socialist economics rises from the dead only to die again. What remains alive, each time, is Marx's moral critique of capitalism.

Even Adam Smith claims that capitalism is a compromise with selfishness: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” Capitalism bribes us to work for the common good. Capitalism economizes on virtue; socialism needs more virtue than we can supply.

This argument is not good enough. Market society needs to be defended on moral terms, not just on economic terms.

Oxford professor G. A. Cohen was the leading socialist thinker of the past 100 years. In his final book, Why Not Socialism? Cohen asks, would a perfectly just society be socialist or capitalist? He proposes the following test: Imagine a world full of saintly people. Whatever economic system saints would use is the only system worthy of being called "just." Saints could (of course) make socialism work. The standard economic argument against socialism no longer applies. So, Cohen concludes, capitalism might be a good system for bad people, but socialism is the good system for good people.

Some defenders of markets dispute whether Cohen's test is the right test. But Cohen has a point. The standard case for capitalism concedes the moral high ground to socialism. A better response is to grant socialists their test, but then show them their test doesn't vindicate socialism.

That's where Mickey Mouse comes in. Watch closely: The children's CGI-animated cartoon The Mickey Mouse Clubhouse presents a morally flawless capitalist society. Minnie Mouse owns a "Bowtique"-- a bow factory and store. Clarabelle Cow owns a muffin factory and sundries store. Donald Duck and Willie the Giant own farms. They live by a form of capitalism, but none of the complaints socialists have about real-life capitalism apply there. There is no exploitation, greed, fear or heartless indifference. The characters are respectful, generous and just. Yet, even though they are virtuous enough to make socialism work, they choose capitalism instead. They still find value in private property and trade. The Mickey Mouse Clubhouse shows us that while socialist utopia may be wonderful, capitalist utopia is even better.

If people were morally perfect, why would they still want private property? For Minnie Mouse, running her bow factory provides the same satisfaction a sculptor gets from shaping stone. People -- and anthropomorphic animals -- have ideas and visions that they want to implement. Pursuing individual projects over the long-term is part of what gives coherence and meaning to our lives. To express ourselves, develop ourselves, and craft ourselves often requires that we have sustained and exclusive control of objects over time. Socialism, even in its most idealized form, robs us of this.

If people were morally perfect, why would they still use markets? The Clubhouse characters trade value for value. They take joy in creating things others want for their own sake. They use markets not because they are selfish and uncaring, but precisely because an extended market serves the common good. The market is a network of mutual benefit. It creates background conditions of wealth, opportunity, and progress. This holds true, for the most part, even in the real world of selfish people; it holds all the more true in Mickey's world.

In every recession, people look for alternatives to markets societies. Socialists from Michael Moore to the Wall Street Occupiers, tell us their vision of socialism is better than real-life capitalism. Maybe they are right. But that doesn't settle anything. Defenders of market society can just borrow arguments from their socialist playbook.

The Mickey Mouse Clubhouse shows us, to our great surprise, that when we judge systems by Marxist moral standards, what emerges as the best way to live together isn't a Marxist commune, but Clubhouse Capitalism. In the real world, capitalism, for all its terrible shortcomings, does better than socialism. But even in utopian conditions, capitalism retains the moral high ground. Capitalism beats socialism at every level.

Jason Brennan is an assistant professor of economics and public policy at Georgetown University's McDonough School of Business and author of Why Not Capitalism?

]]>http://fortune.com/2014/06/19/what-the-mickey-mouse-club-says-about-capitalism/feed/0THE MICKEY MOUSE CLUBnt2192How to fix youth unemployment? Pay your internshttp://fortune.com/2014/06/11/how-to-fix-youth-unemployment-pay-your-interns/
http://fortune.com/2014/06/11/how-to-fix-youth-unemployment-pay-your-interns/#commentsWed, 11 Jun 2014 19:03:33 +0000http://fortune.com/?p=639147]]>Around this time of year, a number of our friends are celebrating their graduations from both high school and college. Yet for far too many, the transition from student life to the working world is filled with uncertainty. High unemployment and underemployment mean less opportunity for more members of our generation. And as rising income inequality and a recovering economy loom large, the availability of good jobs are crucial for young Americans to achieve economic security.

So why are more young people unemployed or underemployed? Though a slow recovery and a natural discrepancy between youth and overall employment are partially to blame, our education system is responsible as well. Student loan debt and tuition costs continue to rise, saddling young people with a heavy burden in a dismal job market. Meanwhile, many students take out loans and don't complete their degree.

While it is clear that we need reforms to ease student debt, lower tuition costs, as well as improve degree completion rates, it is equally evident that young people need more options to help transition from school to the working world. A four-year college is a terrific option for many students, but it's not the only way - vocational schools and two-year colleges can equip many students with the right skills for today's job market, and it's likely to cost a lot less.

One option is to expand vocational programs in high schools so that schools graduate students who are both college and career ready. Federal funding for vocational training has decreased from $12 million in 2002 to just over $7 million in 2011, according to the Department of Education. That is why we need state and local governments to help expand vocational programs that serve as a career bedrock for young Americans. This is not to discourage four-year degrees - indeed, college remains vitally important to economic mobility, but we must also ensure there's a range of options.

Furthermore, Congress should streamline overlapping federal workforce development programs. Currently, there are 47 — nearly all of which, 44, are overlapping, according to a report by the Government Accountability Office. As government commits to expanding vocational programs, it must also maximize the efficiency of existing programs because overlap leads to wasted resources and bureaucratic confusion.

Finally, colleges, universities and the federal government must work together to reduce the financial burden of unpaid internships and ultimately seek to eliminate them altogether. These, too, limit opportunity for students, particularly low- and middle-income students, because for many, unpaid internships are unattainable. Too often this leads to unfortunate self-selection; indeed, many of our classmates and our friends refused unpaid internships in Washington because they couldn't afford to spend a summer in the nation's capital without financial support. This only perpetuates a cycle of privilege and wealth.

What's more, paid interns are more likely to find jobs later. According to the National Association of Colleges and Employers (NACE), 63.1% of paid interns in 2013 landed a job compared to 37% of unpaid interns. Unpaid interns were only 2% more likely than non-interns to get job offers. Part of the transition from unpaid internships to paid ones involves imbuing those positions with more value for both the employer and the intern. Through more affordable and more valuable internships, more young people will be better trained for jobs.

Though we come from different political backgrounds, we must together engage our communities on an intergenerational level and create bipartisan political space for our representatives to act, so that the problems of today do not become the problems of tomorrow.

The millennial generation and America's young will bear the brunt of inaction, even though currently millennials have the least say at the policymaking table. It's time for that to change — Congress must act now on these crucial issues.

Andrew Kaplan, a rising senior at Brown University and New York City native, is co-founder and Chief Action Officer of Common Sense Action, a bipartisan millennial group focused on advancing generational fairness, investing in millennial economic mobility and repairing politics. CSA has 24 chapters across 15 U.S. states. Maddie Gootman, a rising senior at Vanderbilt University and South Carolina native, is the president of the Vanderbilt University chapter of CSA.